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PHOs reach out to 1.7 million New Zealanders

July 1, 2003

Primary Health Organisations reach out to 1.7 million New Zealanders

Health Minister Annette King said today the enrolment of 1.7 million New Zealanders in Primary Health Organisations after just one year surpassed all her expectations.

Prime Minister Helen Clark and Ms King today visited the Newtown Union Health Service to announce the formation of 13 more PHOs, bringing the total to 47.

Ms King said: “I would have been pleased if the Government had achieved its hope of 300,000 New Zealanders enrolled in PHOs in the first year, but we have 1.7 million New Zealanders in PHOs already. None of us expected to get this far in just one year.”

Describing the growth rate of PHOs since they began on July 1 last year as a real success story, Ms King said more than 800,000 of the New Zealanders enrolled were now paying no more than $20 to visit the PHO.

“But PHOs are doing a lot more than just saving money for patients. They are reaching out to people by providing a range of primary health care services such as immunisation, child and women’s health, sexual health services, and programmes to manage diabetes and reduce heart disease.”
Ms King said the Government is spending more than $400 million over three years on implementing the primary health care strategy, with $50 million allocated in 2002-03, $165 million this year, and $195 million next year.

“I cannot imagine a more valuable area for the Government to spend health dollars than primary health care. Improving early access to health care and removing inequalities is absolutely crucial if we are to make a real difference to the health of New Zealanders,” said Ms King.

“PHOs offer us our best chance yet to improve health. The logic is obvious. At present about 30 percent of hospital admissions for those aged under 75 are avoidable. Two thirds of these, or more than 60,000 hospital admissions, can be avoided through earlier access to effective primary health care.”

Ms King said the establishment of 13 new PHOs meant there were now only five of the 21 District Health Boards (DHBs) without a PHO in their region, and she expected all DHBs to have PHOs within the next six months.

Out of the 47 PHOs, 32 are funded under the ‘access’ formula, which targets high health need, low socio-economic areas, seven are funded under the ‘interim’ formula, and eight are ‘mixed’, (‘interim’ PHOs with some practices in the area that qualify for ‘access’ funding).

Ms King said from October 2003 all PHOs would be funded to charge low fees for all patients under 18 and the Government intended to roll-out low cost health care for people aged over 65 from 2005–06.

“A new ‘Care Plus’ initiative, to provide low cost health care for many older people with very poor health as well as others requiring high levels of care, is also being piloted this year and is expected to roll-out in all PHOs from January,” Ms King said.

“One thing all PHOs have in common is that they will focus their energies on keeping their enrolled populations as well as possible for as long as possible. There has been an incredible amount of hard work in the past year, with magnificent and enthusiastic support from many health professionals.”


Primary Health Organisations beginning July 1, 2003 DHB

PHO PHO Type DHB Number enrolled
Primary Health Network for Central Auckland Interim Auckland 223,362
Auckland PHO Interim Auckland 27,357
East Health Services Limited Interim Counties Manukau 29,023
Coast to Coast PHO Interim Waitemata 9,742
Taumata Hauora Trust PHO Access Whanganui 5,991
Whanganui Regional PHO Mixed Whanganui 56,516
Tararua PHO Interim MidCentral 15,431
Canterbury Community PHO Access Canterbury 5,369
Kapiti PHO Mixed Capital and Coast 33,189
Capital PHO Interim Capital and Coast 122,396
Pinnacle Taranaki PHO Access Taranaki 5,261
Te Korowai Hauora o Hauraki Access Waikato 8,018
Manaia Health PHO Access Northland 73,377

Questions and Answers

What is primary health care?
Primary health care covers a broad range of out-of-hospital services, although not all of them are Government funded. It aims to improve the health of the people in communities by working with them through health improvement and preventative services, such as health education and counselling, disease prevention and screening.

Primary health care includes first level services such as general practice services, mobile nursing services and community health services targeted especially for certain conditions, for example maternity, family planning and sexual health services, mental health services and dentistry, or those using particular therapies such as physiotherapy, chiropractic and osteopathy services. Chronic diseases, such as diabetes are best managed by primary health care services so that complications can be prevented or mitigated.

What is the Primary Health Care Strategy?
The Primary Health Care Strategy was launched in February 2001 by Health Minister Annette King. It builds on the population health focus and the objectives of the New Zealand Health Strategy and the New Zealand Disability Strategy and outlines how a different approach to primary health care will improve the health of all New Zealanders through: a greater emphasis on population health, health promotion and preventative care; community involvement; involving a range of professionals and encouraging multidisciplinary approaches to decision-making
improving accessibility, affordability and appropriateness of services;
improving co-ordination and continuity of care; providing and funding services according to the population’s needs as opposed to fee for services when people are unwell.
What is a Primary Health Organisation (PHO)?
PHOs are the local provider organisations through which District Health Boards (DHBs) will implement the Primary Health Care Strategy. The essential features of PHOs are set out in the Minimum Requirements released by the Health Minister in November 2001:
 PHOs will aim to improve and maintain the health of their populations and restore people's health when they are unwell. They will provide at least a minimum set of essential population-based and personal first-line general practice services
 PHOs will be required to work with those groups in their populations (for example, Māori, Pacific and lower income groups) that have poor health or are missing out on services to address their needs
 PHOs must demonstrate that they are working with other providers within their regions to ensure that services are co-ordinated around the needs of their enrolled populations
 PHOs will receive most of their funding through a population needs-based formula (capitation)
 PHOs will enrol people through primary providers using consistent standards and rules
 PHOs must demonstrate that their communities, iwi and consumers are involved in their governing processes and that the PHO is responsive to its community
 PHOs must demonstrate how all their providers and practitioners can influence the organisation's decision-making
 PHOs are to be not-for-profit bodies with full and open accountability for the use of public funds and the quality and effectiveness of services.

What is the Government's high-level direction for the Primary Health Care Strategy?
The agreed high-level direction is as follows:
 Subject to the availability of funding, the public share of primary health care funding will be substantially increased over the next 8-10 years
 Over time, as PHOs are formed, they will be funded according to the needs of their enrolled populations to provide more effective and affordable care with a population health focus
 As this happens, reliance on the Community Services Card (CSC) will be progressively reduced
 As the CSC will still be needed for a number of years, measures will be implemented to improve its take-up in the meantime.

What funding is available for the Primary Health Care Strategy?
The Government has committed just over $400 million over three years to begin implementing the Primary Health Care Strategy.
Where has the new funding been directed?
The Government’s priorities for the new primary health care funding (in order of priority) are:
1. High needs populations: Extra funding will be made available to PHOs covering very deprived populations in order for them to have low fees for all their patients, provide services to ensure care gets to where it is most needed, include services to improve and maintain health as well as restore health, and to move to fairer funding allocations on a population needs basis.
2. Adjust subsidy for children under 6: The General Medical Services subsidy for children under six years was adjusted in July for inflation since 1997.
3. Progressively lower cost of access to primary health care: As more funding becomes available from 2003/04, it will start to be applied to extend free or low cost access to primary health care services through PHOs. The priorities will be reducing costs for school-age children and individuals with high health needs participating in Care Plus.
4. Sustainable rural services: Measures have been introduced to help implement the Primary Health Care Strategy in rural areas and to retain and recruit the rural health care workforce. This represents a $32 million commitment over three years.
5. PHOs across the country: Primary Health Organisations are being encouraged to set up across the country; they will be funded according to their enrolled population to provide a range of population based services to improve and maintain health as well as treatment services; and to address health inequalities.
6. Improvements to CSC and HUHC: A range of measures will be introduced to improve take-up of Community Services Cards until such time as increased funding means cards are no longer needed. Improvements to the High User Health Card will also be implemented.
7. Pharmacy co-payments: From October 1 2003 prescription fees will be reduced to a maximum of $3 for children aged between six and 17 enrolled in interim PHOs, and for patients of all ages enrolled in Access PHOs.
8. Adjustment to retain value: From July 1 2003 all PHO capitation rates will be increased by 2.52 percent in line with the Government’s commitment to retain the value of the contract.
9. Nursing workforce development: Primary Health Care nursing scholarships have been established to assist nurses working in the primary sector to gain post-graduate qualifications. About 180 nurses were allocated scholarships earlier this year, with a second round of scholarships occurring later in the year. In another nursing initiative, eleven primary health care innovative models were selected from more than 130 proposals. Nearly half of the models, aimed at reducing fragmentation and duplication of nursing services, have already been implemented.

How are PHOs being established?
A small amount has been made available to help PHOs to get established, particularly small ones.

What will happen to the Community Services Card?
The Community Services Card will be phased out over the next 8-10 years. As it will still be needed by many people over the medium term, improvements will be made to make it more effective. Improvements will include measures to:
 Increase the numbers of people who get the card automatically rather than having to apply
 Simplifying the process for low-income people to gain a card
 Making it easier for providers to determine whether an individual has a card.

What initiatives are planned or underway to improve the take-up of the CSC?
They include a greater promotion of the card, via Maori and Pacific Island networks, as well as employer and union representatives, streamlining the application process and greater automation of assessment of entitlement. The Ministry of Health is also continuing to fund a free telephone service for providers to verify patients' card status.

What about changes to General Medical Services subsidy (GMS)?
From October this year, all under 18s in all PHOs will receive low cost health care.

How are PHOs different from Independent Practitioner Associations?
PHOs must meet a set of minimum requirements that do not apply to IPAs. Many IPAs would already meet some of these requirements but few would meet all of them at this stage. Several IPAs are considering making the changes necessary to become a PHO while others are supporting the establishment of PHOs locally. PHOs are also expected to develop as multi-disciplinary teams (eg doctors, nurses, Plunket, pharmacists, etc).

When did the first PHOs begin operating?
TaPasefika Health Trust and Te Kupenga O Hoturoa, in the Counties Manukau District Health Board (DHB) region, were established in July 2002.

How many PHOs are up and running?
From today, 47 PHOs have been established, covering a population of approximately 1.7 million New Zealanders.

What are the formulae that have been developed to fund PHOs?
There are two: Access and Interim.

How will the Access formula work?
It will allow all those enrolled with an Access PHO to be charged low patient fees, or access free care, and there will be no need to use CSCs. In the first instance, the Access formula will be available only for PHOs (or practices/clinics within PHOs) serving populations with high concentrations of NZ Deprivation Decile 9/10 and individuals with high health needs.

What about the Interim formula?
Until there is enough funding for all PHOs to be on the Access formula, an Interim formula will apply to other PHOs/practices. The Interim formula will continue to use CSC status both for determining funding and setting patient fees. It includes additional funding for a range of new functions such as health promotion and extra services to improve access for high-need groups.

Over time, as funding allows, the per capita amounts in the Interim formula will be increased towards the levels in the Access formula. This will start in 2003/04 with increases for all school-age children, and for individuals with high needs.

What are the key factors of the two formulae?
Both the Access and Interim Formulae recognise ethnicity and deprivation, alongside age and sex, as key determinants of population need, and both provide increased funding for HUHC-holders. Weightings for ethnicity and deprivation will target extra funding to improve access for high need populations through services such as clinics on marae or employing community health workers. PHOs will need to satisfy their DHB on how the extra access funding will be used.

What alternative funding approaches have been proposed and why?
Following concerns expressed by some GP groups two PHOs are trialling an add-on to the Interim formula that will give extra funding for people with high health needs. Called ‘Care Plus’, this will provide low cost access for people with high needs until Access funding levels are available throughout New Zealand.
The key criterion is likely to be that the person is expected to need at least two hours of clinical contact time in the coming six months. This need for care might be indicated in a number of different ways including that the person is:
 Suffering from two or more chronic illnesses
 Has a track record of heavy utilisation of primary care (six visits in the past six months to primary care or an Emergency Department)
 Has a track record of acute hospital admissions (two non-surgical acute admissions in the past year)
 Has a terminal illness.
About six percent of the population will come into this category.
All 'Care Plus’ patients will have a care plan developed for them, including quarterly reviews to check on health status, treatment, medications and so on. The care will be able to be delivered flexibly, using GPs and other members of the PHO team. Capitated funding will facilitate that.

How much will it cost New Zealanders to visit PHOs?
All people enrolled with ‘Access’ PHOs will have low patient fees. Although charges will vary, many Access PHOs may be able to offer free care for children under six. School-age children will be charged less than $10 while most adults will pay in the order of $10-$15. Each Access PHO will agree maximum patient fees with its DHB. In 2003-04, patient fees for under-18s will start to be reduced for people enrolled with PHOs funded under the Interim formula.


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